Further thoughts on the immigration policy changes

Having had some more time to look at the details of the government’s announced changes to the Skilled Migrant category (the main stream under which residence approvals are granted) and the proposals they are consulting on for changes to the Essential Skills (temporary work) visas, I’m perhaps slightly more positive than I was yesterday.   Within the government’s overall vision of what immigration can offer New Zealand –  one that I think is profoundly incorrect, based not on a hunch about what might be,  but on decades of New Zealand’s actual experience with large scale immigration programmes – the changes look as though they will represent an improvement.    Even if one is sceptical about the overall vision, the changes (actual and proposed) are likely to modestly reduce the damage that high levels of non-citizen immigration is doing (holding back real productivity and earnings growth) to the material living standards of New Zealanders.   That is welcome.

What is there to like?     Take the Skilled Migrant category changes first (which are definite, not just proposals for consultation)

In future, applicants with jobs at ANZSCO skill levels 1, 2 and 3 (currently regarded as highly-skilled) will only be awarded points for their employment if they are paid at or above NZ$48,859 per year (or NZ$23.49 per hour).

Bonus points will be awarded for remuneration at or above NZ$97,718.00 per year (or NZ$46.98 per hour)

and, straight from the government’s document,

Work experience

  • More points will be available for work experience.
  • Points will be awarded for skilled work experience in ANZSCO skill level 1, 2 and 3 occupations.
  • Points will be awarded for skilled New Zealand work experience of 12 months or more. There will be no additional points for work experience of two years or more.

Qualifications, age and partner’s qualifications

  • Points available for recognised level 9 or 10 post-graduate qualifications (Master’s degrees and Doctorates) will increase.
  • Points for people aged 30 – 39 years will increase.
  • Partner’s qualifications will only be awarded points if they are a recognised Bachelor’s level degree or higher or a recognised post-graduate (level 9 or higher) qualification.

Which factors will applicants no longer be able to gain points for?

Points for the following factors will be removed:

  • qualifications in an area of absolute skills shortage
  • skilled employment, work experience and qualifications in Identified Future Growth Areas
  • close family support in New Zealand

The document is light on detail.  There is no sign of how many more points will be available for things like higher level qualifications,  but as I noted recently it did seem absurd that if one needed 160 points for residence, there was only 5 points difference between what was on offer for a basic qualification (in an age when bachelors degree are a dime a dozen) and those for masters or doctorates.  Academic qualifications aren’t everything –  I always remember a school teacher advising us of his view that “the PhDs are the plodders” –  but if we are aiming for skilled and innovative people, we probably should be more strongly differentiating between higher and lower level qualifications.   Similarly, I like the idea of more points for more highly paid jobs.

And if we considering giving people permanent rights to live here –  which is what the Skilled Migrant category is about –  we shouldn’t be preferencing people who happen to fit current shortages as judged by Cabinet ministers and MBIE officials.  We are taking people who, we hope, will contribute strongly over 30 or 40 years.

On the other hand:

  • the additional points on offer for jobs outside Auckland, added in last year, remain.   One understands the politics of those points, but they simply have the effect of lowering the average quality of the people who are granted residence (as people with lower skills etc who can get a job outside Auckland will beat out higher-skilled people with a job in Auckland,
  • the minimum wage in New Zealand is now $15.75 an hour.   I reckon that is too high –  it is one of the highest relative to median wages anywhere in the OECD –  but it is the government’s own choice, and they keep increasing it.    But to be regarded as doing highly-skilled work, under the changes announced yesterday, people will only have to be earning $23.49 per hour, or just under 50 per cent more than the minimum wage.    It is good that they have put a threshold in but it is a pretty undemanding one.  Of course, we don’t know how many people it will catch –  and neither apparently does the government –  but if it is many, the system to now has been working even more badly than most have realised.
  • relatedly, I’m not really sure why we are giving residence points to anyone with an skill level 4 or 5 occupation.  In fact, if one looks carefully at the ANZSCO skills lists (here – I suggest Table 5 on the first spreadsheet) it isn’t clear why many of the occupations in the skills levels 2 and 3 qualify for points.    Here is just one subset of the level 2 skilled occupations
Hospitality, Retail and Service Managers
141 Accommodation and Hospitality Managers
1411 Cafe and Restaurant Managers
141111 Cafe or Restaurant Manager 2
1412 Caravan Park and Camping Ground Managers
141211 Caravan Park and Camping Ground Manager 2
1413 Hotel and Motel Managers
141311 Hotel or Motel Manager 2
1414 Licensed Club Managers
141411 Licensed Club Manager 2
1419 Other Accommodation and Hospitality Managers
141911 Bed and Breakfast Operator 2
141912 Retirement Village Manager 2
141999 Accommodation and Hospitality Managers nec 2
142 Retail Managers
1421 Retail Managers
142111 Retail Manager (General) 2
142112 Antique Dealer 2
142113 Betting Agency Manager 2
142114 Hair or Beauty Salon Manager 2
142115 Post Office Manager 2
142116 Travel Agency Manager 2
149 Miscellaneous Hospitality, Retail and Service Managers
1491 Amusement, Fitness and Sports Centre Managers
149111 Amusement Centre Manager 2
149112 Fitness Centre Manager 2
149113 Sports Centre Manager 2
1492 Call or Contact Centre and Customer Service Managers
149211 Call or Contact Centre Manager 2
149212 Customer Service Manager 2
1493 Conference and Event Organisers
149311 Conference and Event Organiser 2
1494 Transport Services Managers
149411 Fleet Manager 2
149412 Railway Station Manager 2
149413 Transport Company Manager 2
1499 Other Hospitality, Retail and Service Managers
149911 Boarding Kennel or Cattery Operator 2
149912 Cinema or Theatre Manager 2
149913 Facilities Manager 2
149914 Financial Institution Branch Manager 2
149915 Equipment Hire Manager 2
149999 Hospitality, Retail and Service Managers nec 2

Plenty of good people do those jobs, no doubt. Such roles all have their place in a modern economy.  But this programme is supposed to be bringing in highly-skilled, able and innovative people who can help lift the overall productivity of the New Zealand economy.  If we were simply interested in getting ever more people then a coarse sifting like this might be fine, but the goal of the programme –  and this is the residence programme, not a short-term skill shortages programme –  is more ambitious, and supposedly transformative, than that.    Simply requiring a beauty salon manager to earn more than 1.5 times the average wage bears no relation to that ambition.

In a sense, the problem with the programme is that New Zealand just isn’t that attractive to very many of the sorts of people who might genuinely make a difference.  It is a nice place to live –  if you don’t mind being far from anywhere else –  and the living standards aren’t bad, but if you are young, energetic, innovative, and genuinely highly-qualified you are more likely to be interested in a lot of other places before New Zealand –  all the other Anglo countries (including Ireland) for a start, and probably most of Europe too (some places in Asia –  Singapore, Dubai – probably attract some too).  Mostly they are richer than we are, mostly they have bigger domestic markets, and all of them are closer to other places (home, other countries, other markets etc).    It is part of the reason why I argue for markedly pulling down our residence approvals target, because it would then help us focus on attracting the small number of people who might really benefit New Zealanders.

What of the proposed changes to the Essential Skills temporary work visa (details at the link above)?

They are a modest step in the right direction.   But –  seasonal roles aside perhaps –  it isn’t clear to me why we continue to grant “Essential Skills” visas for any one in any occupation at levels 4 and 5 on the ANZSCO list?    Perhaps people will be less inclined to come in future, especially if they have partners/spouses who themselves can’t qualify for a work visa.  Perhaps, but New Zealand wages are still well above those in –  say –  the Philippines, and there is a huge number of Filipino workers in a various advanced economies (eg Hong Kong, and various Middle East countries) doing relatively unskilled roles, even though they’ve had to leave families behind.   The proposed three year limit (at any one time) on how long people in these occupation groups could stay in New Zealand seems appropriate, to minimise the risk of people living here long term with no plausible path to residency.   But three years is a reasonable chunk of time for a short-term relocation (in my own career, I did three temporary roles abroad, each for two years at a time).    I’d also be more comfortable if even people in higher-skilled roles were only eligible for three year visas (instead of five years).  I’d happily allow a single three year extension for, say, jobs in skill level 1, but after that either the person should settle here permanently, or return home.

Sadly, there is also no sign of any real change in how the so-called labour market test is operated.   The most compelling labour market test isn’t that “an employer satisfy an immigration officer that they have made genuine attempts to recruit or train domestic workers” (or even that they have advertised at WINZ), but what has happened to the relative price paid for that sort of role.     If wages for a particular type of skill have risen, say, 10 percentage points more than the market average across the economy in the previous two years, it might be a pointer towards some sort of genuine “skill shortage”.  But in the whole immigration system, and particularly in the Essential Skills category, there is no hint that changes in wage rates should be a material indicator.   We should ue market price indicators more, and bureaucratic judgement (and the employer’s persuasive gift of the gab) less.

I noted yesterday that this announcement made no attempt to deal with the rort that is much of the student visa system.    That still appears to be true, but there might be some beneficial effects  nonetheless.   It may well be that foreign students, using the extensive right to work provisions the government introduced a few years ago,  may be  heavily represented among those doing notionally level 1,2 or 3 jobs are yet getting paid quite low wages (below than 1.5 times minimum wage threshold).  If so, you would expect that this package –  under which such jobs don’t count towards residence points –  might diminish the attractiveness of New Zealand PTEs.     Cutting back export subsidies is always a good thing.

Overall, I think my assessment yesterday was right.  This is a fairly modest unambitious package, that (deliberately) doesn’t attempt to seriously reduce the typical level of non-citizen immigration to New Zealand.  But it does take some steps that will help modestly raise the average skill level of those coming to New Zealand.  But the changes are small, and don’t address the medium-term challenges around non-citizen immigration to New Zealand.   Even given the desire to continue with large-scale non-citizen immigration, the government could easily have gone much further in increasing the focus on the really skilled and able people whom we might be able to attract.      I’m not sure why they won’t.  Probably they are too influenced by short-term employer pressures –  which are real, but which change if overall immigration policy is changed enough (because overall demand abates too) –  and by the siren call of high headline GDP growth.  All while the tradables sector, productivity, and per capita living standards do badly, and –  since the government refuses to do anything serious about freeing up land supply for housing, even when the votes are on offer  – the house price pressures just get worse.  It all works most against the younger and poorer New Zealanders, but isn’t helping most of the rest of us either.

16 thoughts on “Further thoughts on the immigration policy changes

  1. …out of curiosity, if lower immigration did ease pressure on real rates and caused a decline in the NZD, what new export activity could bloom you think? (I assume the market mechanism would reveal the answer in due course but for interest…gut feel points toward further tourism?)

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  2. You would expect existing exporters to do better – all else equal – including tourism, but also export education, agriculture etc, although the fall in the exchange rate would to some extent probably be offset be higher domestic wages. In each industry it would encourage more capital intensive forms of production.

    Beyond that I don’t know – I’m a macro guy. A cop out I know, but think about those smart firms that start here and typically relocate abroad. For some of them the balance would shift – still advantages to being closer to markets etc, but if the IP is being generated here – in NZD terms – for some it will relatively more attractive to stay.

    Also, bear in mind that if the population growth went to zero we wouldn’t need lots more new types of exports to see the export share of GDP rising over time.

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    • If population growth went to zero then we would be looking at the deep recession similar to 2009 to 2011 when New Zealanders left to the tune of 40,000 to 50,000 a year net migration loss. Now with the economy growing strongly more New Zealanders are staying. I cannot believe a top economist would suggest that a poverty stricken economy is better than a growing economy we now have. Productivity may suffer. But I prefer people that eat, that spend in the local community rather than a robot that brings high productivity but zero spillover into the community.

      The housing issue is simple. Build more houses.

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      • I think you have the causation the wrong way round. Economies aren’t weak (per capita, per hour worked) because people are leaving, or because population is flat, but rather people tend to leave when the opportunities here aren’t that good. As I’ve shown previously, there is no evidence that countries with flat population tend to perform worse economically than others. As a simple example – and there is always a lot else going on – think of Germany.

        To be clear, a poverty-stricken economy is clearly inferior to one generating lots of productivity growth and per capita income growth. But NZ today is neither of those.

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      • Germany, known for its brutal efficiency accepted 1 million Muslim refugees out of kindness of their hearts or out of a desperate need to repopulate their barren cities?

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      • Neither motivation I suspect. Germany has a largely flat population, and the cities that have emptied out (as all countries have cities/towns in relative or absolute decline) are unlikely to be long-term attractive homes to refugees.

        I say “neither” because it wasn’t clear the German population approved of anything like that sort of inflow. It was just a whim of the Chancellor. Her motives were perhaps a mix of genuine compassion, and a desire to ease stresses elsewhere in the EU/euro area.

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  3. As usual I agree with most of your article.
    You reckon the minimum wage of $15.75 is too high. I have few expensive habits and I could live on it so long as I retain my mortgage free house, have assistance with my rates and no family. A job something like a security guard for a bank or parking warden used to have a mild appeal but because I’ve made an unearned fortune by accidentally entering the Auckland property market I choose to live on my pension.
    Unfortunately this is the kind of money that unskilled parents earn doing shift work such as supermarket workers, carers, cleaners or fast food attendants and frequently in second jobs trying to bring up a family. No wonder NZ’s children are suffering.
    Fewer immigrants importing their low pay will be a help.

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    • And of course, I only argue that is too low given the appalling state of NZ productivity. If we must have a statutory minimum wage, I’d love to be in a world where – say – real median wages were 50% higher than they are, and a minimum wage was there simply as some sort of buttress still at 15.75.

      I’m sure no one wants to be living on a min wage. then again, a high minimum wage prices other people out of the market altogether, and welfare benefit rates are materially lower.

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      • I agree about the low median wage. In PNG they tended to employ Kiwis because they were cheaper than POMs and Aussies.
        When I was young there was no embarrassment for families living on a minimum wage.
        One reason for a higher minimum wage is there should be a clear gap between full time employees and beneficiaries. There is WFF but that has a bad reputation in the UK. I suppose it depends on how well it is done but certainly inclined to be complicated and expensive to operate.
        My instinct is a return to a generous universal child benefit preferably with some tax benefit for two parents living at the same address. I wish I could make an economic argument for it but I don’t have the knowledge/expertise. The only arguments I’ve heard against it are (a) a single person objecting to supporting other people who have chosen to have children (b) the increase in income tax that would be needed to pay for it (c) a left wing objection to giving money to millionaires.

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      • It might surprise you that the generally “right wing” 2025 Taskforce toyed with the idea of a universal child benefit. I suspect there would be more “right wing” objections than left wing ones – partly on targeting grounds.

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      • With tourism headed towards 4 million tourists and the next target being 7 million., expect the hospitality and service sector to dominate the list of skilled migrants. Between international students and tourism, this is a $20 billion dollar industry. 100% of that is being spent directly into the local communities. There is few other export industry that can compete with the extent of spillover spending into the local communities.

        Expect more low skilled migrants because tourists are foreigners. They want to eat foreign food. The hangi is a pleasant change but no foreigner will eat that everyday of a week. Therefore expect skilled foreign chefs to continue to top the list.

        industry demands workers, therefore if we do not have productive industries no point bringing scientists into drive taxis.

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      • I’ll be surprised if we get 7 million tourists any time in the next 25 years. But curiously enough, France, Italy and the UK sustain very large tourist industries without aggressive non-citizen immigration programmes.

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  4. About immigration points for education. I went through this process in 2003; I was had points for my BSc and felt it unfair that when I entered university (Scotland) 4% of school leavers entered university. It was 6% when I left and 50% when I arrived in NZ. Couldn’t help feeling my education points were more hard won than most applicants. On the other hand as a computer programmer with very wide experience I know 3 who were better programmers than me (I mean better than me every day of the week) and none of them had a degree. [And if I had been in charge there is no way I would have been allowing 54 year old programmers into NZ whatever their point count].
    Then again university degrees have a ranking: my chemistry lecturer pointed out that students who were top in Chemistry in year 1 ended up studying Physics or Maths. It has left me with a bias; Maths first (with number theory and stats being the hardest), Physics, Chemistry, other sciences, history, languages and then all other art degrees. I’ve never decided whether computing is a science or an art.
    A long reply just to say you are right a Phd is way harder to obtain than a degree and is a proof of some intellect.

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